Group buying gaining popularity with help from social media

Group buying is an online shopping strategy where several people agree to approach a vendor of a specific product in order to collectively bargain with the proprietor as a group. The idea is to get good discounts. The group agrees to purchase the same item. The shoppers benefit by paying less, and the business benefits by selling multiple items at once.

Group buying is popular in China, according to the MIT Sloan Management Review. Consumers form clubs called "tuangous" in which they collectively negotiate for a better price. Unfortuntely, the group buying concept hasn't caught on here in the United States. The early companies that tried to make it work couldn't generate enough interest from consumers.

Some analysts say people had difficulty grasping the concept. Others say market conditions prevailed, the first generation of these sites were created during the dot-com boom and went away during the bust. Well-funded sites like Mercata and StoreMob tried, but failed due to a lack of interest from consumers. However, with the increased popularity of social media sites like Facebook and Twitter, the concept has a better shot now.

Why should anyone be interested in group buying? Well there's the obvious reason – negotiating your own deal saves you money. Buying in groups also can save you time as one person doesn't have to do all the research to find the right product at the right price. Shopping it more fun with friends, your group can share advice and information about the products before and after you make the purchase. With group buying, you're in a position to buy straight from the source – no more big box retailers. And finally, who really wants to spend their Sunday mornings clipping coupons? (On second thought, keep clipping those coupons, my column does appear in a Sunday newspaper.)

Today, there are several sites from consumers to choose from. Liba.com and Teambuy.com.cn are a couple of the more popular sites. A guest at our New Year's Eve party described some deals — including a half-price meal at an Indian restaurant in Chicago — that he recently scored through a Web site called Groupon.

Groupon uses social media to organize mass purchases. The site offers a deal a day by local businesses in 48 cities for now, including Miami, and is only good if enough people participate. There are discounts on items like garden supplies, meals, show tickets and even surfing lessons.

Last Sunday, Groupon offered five days worth of meals in Miami prepared and delivered for $37 — 51 percent off the regular $75 price — if 25 people agreed to participate. By Sunday evening, more than 200 people had purchased the deal.

Groupon partners with local businesses to offer the deals. For those that generate enough interest, Groupon collects the money from the participants, distributes a group coupon to them and sends a check to the participating business, keeping a fee for the transaction.

I like the idea that Groupon finds local deals, but I prefer a site like GotoGroup Buy, which allows me to choose what I want to buy and then allow others to join me so we can negotiate a deal. Right now, the site mostly has small-ticket items, such as stereo head phones and auto parts. But imagine using it the next time you want to buy a car and you have 200 others who want to make the deal on a similar make and model?